Nokia further reduces forecast

For the second time in a month, Nokia revises its forecast and tells investors that a slumping economy will hurt sales in the fourth quarter.

Marguerite Reardon Former senior reporter
Marguerite Reardon started as a CNET News reporter in 2004, covering cellphone services, broadband, citywide Wi-Fi, the Net neutrality debate and the consolidation of the phone companies.
Marguerite Reardon
3 min read

Update at 9:15 a.m. PST: Clarification made to Nokia's market share expectations for the fourth quarter.

Nokia on Thursday lowered fourth-quarter sales expectations for the second time in a month. The world's largest maker of mobile phones also warned it can no longer predict its market share for the quarter.

Before the start of its Capital Markets Day in New York City, Nokia broke the bad news to analysts and investors that it sees more trouble ahead in the current quarter. Specifically, the company expects device volume to fall below the 330 million units it estimated in mid-November that it would sell for the quarter.

The company also said it doesn't see the situation getting much better in 2009, with an expectation of sales falling by at least 5 percent from 2008 levels. While Nokia has previously said it expected a "market decline" in 2009, it hadn't specified how much of a decline.

"The mobile-device-market slowdown has continued more rapidly than previously expected since Nokia issued an update on November 14, 2008," the company said in a statement. "The industry continues to be impacted by the effects of a global consumer pullback in spending, currency volatility, and decreased availability of credit."

The company also blamed "insufficient visibility in the marketplace" to confirm its previous expectation of 38 percent or better market share in the fourth quarter.

That said, the company did say it expects to gain market share in 2009.

While it's evident that consumer spending has slowed down in the industrialized Western markets, Nokia executives also pointed to slower consumer spending in developing markets. Nokia has been very successful over the past few years selling low-cost devices in these markets. The company had believed that these developing markets would be relatively immune to the slowdown hitting developed countries. But the company is finding that not to be the case.

Nokia has also taken a hit in the high-end smartphone market. Even though the company still dominates the market with about 42.4 percent market share for the third quarter, according to market researcher Gartner, it did see sales slow in that quarter.

Nokia wasn't the only company to be hit in the third quarter. This week, Gartner reported that overall sales of smartphones had slowed to their lowest level since the firm started tracking the sector.

In addition to the weakening economy, Nokia is also facing more competition in the smartphone market, especially from companies such as Research In Motion, which sells the BlackBerry devices, and Apple, which sells the iPhone.

However, Nokia isn't sitting still. Earlier this week, it announced its latest smartphone, the N97, which offers a tilted, full QWERTY keypad and a touch screen. The new device, which will sell for a whopping 550 euros ($695), will be available first in Europe.

As competition in the handset market intensifies, Nokia is also focusing more attention on its services. The company also announced this week enhancements to its messaging and mapping services that can be used on mobile devices as well as PCs.